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Address to the ALP Leaders Breakfast, Sydney



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COMMONWEALTH

PARLIAMENTARY LIBRARY MICAH

ADDRESS BY JOHN KERIN MINISTER FOR TRADE & OVERSEAS DEVELOPMENT

ALP LEADERS' BREAKFAST SYDNEY, 19 NOVEMBER 1992

This morning I thought I should give you an early view of the impact a Clinton Presidency looks like having on our trading position. I will also talk a little about the Uruguay Round.

And, as this is a Labor Party turn, I will bring you a message from our sponsor.

There is always a healthy rush of doubt and speculation whenever there is change of government in any country. It is part of the thrill of democracy.

When that country is the United States of America and a new Democrat President is elected after 12 years of Republican dominance, it is no surprise if doubt and speculation arise in abundance from all corners of the globe.

However, the election of Bill Clinton has been notable for the measured responses it has received, both within the U.S. and around the world.

This is testimony to the effectiveness of the Clinton campaign and the responsible policy framework he put forward. While a Clinton administration is clearly going to be more progressive in social policy than those of Reagan and Bush, it is equally clear that it will be less ideologically driven and therefore more practical in its approach to the problems facing the US.

Nevertheless, it will remain very much 'America First', continuing the self-interested pragmatism that has been a hallmark of successive U.S. administrations.

In this, as in many areas of policy, the early indications are that the transition from Bush to Clinton will be characterised by a sense of continuity rather than dramatic change. Trade policy is one area where this analysis appears generally

justified, but with some exceptions.

The Clinton/Gore campaign statement on trade advocates:

1. a renewed use of 'Super 301' in the unilateral pursuit of U.S. trade grievances. This would mark a changed emphasis from the Bush years when the use of 'Super 301' lapsed;

2. a NAFTA, but with the addition of adequate health, water and environmental provisions;

3. a completed Uruguay Round;

4. an Economic Security Council (parallel to the National Security Council) to coordinate U.S. international economic policy;

5. that China not have its Most Favoured Nation (MFN) status renewed until it improves its human rights record. This is perhaps the most marked difference between Clinton and Bush in the trade area and has the potential to aggravate

cross-Pacific trade relations.

'1. - Check Against Delivery

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Specifically on the Uruguay Round, the statement endorses an outcome which opens markets for agriculture and services, protects intellectual property, and 'takes a tough stand against unfair trade practices'.

If necessary, Clinton should find it easier to secure an extension of the Congressional fast-track authority on the Round than a re-elected President Bush would have.

Although Clinton did not stress the issue of the Export Enhancement Program (EEP) in his campaign, it is expected that he will maintain it on the same conditions as Reagan and Bush -that is, at least until the Uruguay Round is successfully concluded. The new Congress may seek a more vigorous use of EEP, but it is too early to make judgements on how strong this pressure may be and how Clinton might respond.

Clinton's views on NAFTA reflect concerns expressed by influential Democrat members of Congress and it appears that Mexico - which stands to gain most from NAFTA - will be willing to engage in further negotiations on the issues he seeks to

include under a NAFTA agreement.

It remains to be seen whether the priority President Bush recently placed on bilateral Free Trade Arrangements ( FTAS) will be maintained by President Clinton. The new Congress is unlikely to be enthusiastic about FTAs and Clinton is also unlikely to seek to challenge Congress in this area.

Clinton generally favours a consensual approach to government and has shown no inclination to take a aggressive stance against Japan. On this basis, APEC should have strong appeal to Clinton as a basis for economic and trade relations with the Asia-Pacific. With active U.S. and Japanese support, APEC would be strengthened as it grows into the 1990s.

Generally then, a Clinton Presidency holds no prospects of major shifts in trade policy which may adversely affect Australia's interests. However, nor are there strong indications that previous U.S. trade policy which has adversely

affected us will be reversed in any major way under Clinton, especially in the short term.

The Uruguay Round remains the key to Australia improving its trading position vis-a-vis the U.S. and internationally. So we welcome President Clinton's commitment to a successful outcome to the Round and we will maintain our strong support to this

end.

Putting trade policy to one side, President Clinton's domestic economic policies will influence Australia's economic fortunes. Management of the U.S. economy over the next few years will be crucial for the pace and strength of the economic recovery in the industrialised world.

As a medium-sized economic power with a growing share of GDP going to exports, Australia stands to benefit from a stable, growing world economy in an environment of greater liberalisation of trade.

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In this regard, Clinton's early statements are also reassuring. He is fully aware of the problems the U.S. faces and he is not resorting to ideological catchcries or simple fixes. He has indicated that he sees solutions to the twin problems of reining in the U.S. Budget deficit and returning to

strong economic growth as compatible.

His domestic economic policy will invoke the politics of consensus and inclusion to harness the enormous resources and energy of the U.S. economy.

There is much to welcome in this approach. The politics of division and the economics of 'trickle down' have been rejected in President Clinton's victory.

The 1990s will be crucial years for the U.S. and the international economy - it is encouraging that the man at the helm of the world's most powerful economy is a man of the future and not of the past.

Speaking of men of the past and the thrill of democracy, our own Opposition will be bidding for government in the next six months.

While the U.S. is moving, through Clinton, to a more enlightened approach to the involvement of Government in the economy, our Opposition is preaching an inflexible, monetarist ideology which is being discarded by other industrialised democracies.

The prospect of Australia being held hostage to this textbook doggerel through the middle 1990$ is horrendous. As the rest of the world moves forward, we would be moving backwards, racked by industrial turmoil of a previous age and starving on the economic vine as Hewson imposed his pathological austerity.

This prospect will be rejected as it becomes increasingly obvious to more and more Australians that contracting the economy is absolutely the wrong approach. They will also reject it because the turmoil of unnecessary, wholesale changes to the tax, welfare and industrial relations systems will be seen as a rough road backwards to oblivion.

This is not to mention the spectre of a 15% tax on every good and service we buy when, at the same time, real wages and household incomes will be pressured downwards.

In terms of trade facilitation, Hewson's plans reveal the blinkered view you get from an ideologue with a textbook.

He would halve Austrade's budget, cutting it by $70m, despite the fact that Austrade is now lean, targetted and leading Australia's export assault in Asia and the world. He argues that the $70m will be raised from the private sector as

industry pays more for Austrade's services.

He would cut $209m from the Aid Budget, bringing it down to the lowest level ever contemplated by an Australian government. In that $209m they will totally eradicate the Development Import Finance Facility (DIFF) Scheme, on which we will spend $120m this financial year.

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He will kill DIFF because it doesn't conform to his level-playing field model. This is despite the fact that $300m of DIFF spending up to 1990/91 resulted in $850m in direct exports by Australian companies and a further $451m in

follow-up exports.

And it is also in spite of the fact that DIFF is available to Australian companies so that they can compete against concessionary finance packages available from other developed countries.

Hewson will also tighten eligibility for Export Market Development Grants (EMDGs), despite the fact that EMDGs have been enormously successful in encouraging small and medium size Australian companies to enter the export business.

He seems hell-bent on being self-defeating, a trait that the Federal Coalition seems to have made its own. That is their business. But they should not be given any opportunity to drag the rest of the country down the tube with them.

Returning to matters international, across the Atlantic from President Clinton's new seat, any Europeans who may have thought that Clinton could be an easier mark in the trade war brinksmanship are by now disabused of that idea. As I said,

like Bush and many who served before him, Clinton will put America first.

But the Europeans face their own difficulties. They look to the future in the drive towards a united Europe, but many of the impediments in their way are hangovers from the past.

The Common Agricultural Policy was the basis on which the European Community was initially drawn together. Since then, the industrialisation of Europe has resulted in agricultural

production slipping to contribute only 4% of GNP.

However, as the saga of the Uruguay Round negotiations shows, the agriculture sector is still very powerful, far beyond its economic importance, especially in France.

The gains to Europe's services and manufacturing industries from a Uruguay Round success are significant, and not denied by EC representatives. Several French Ministers have acknowledged this directly to me over the years.

However, the social and electoral spell that the European farm lobby wields is still strong enough to have stalled a deal for at least two years.

As I speak, crucial negotiations between the EC and US are about to get underway.

Expectations are high that this might be the time we achieve what has become almost a Holy Grail in GATT mythology: an outcome in the Uruguay Round.

Firstly, the US and the EC must resolve the oilseeds conflict between them. This has become an important obstacle to a Uruguay Round success.

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The fact that the two parties are still talking is encouraging. But anyone who has had any involvement in the Uruguay Round will have seen many false dawns.

The challenge ahead for the US, the EC, and all the 105 GATT contracting countries, is to multilateralise the US/EC agreement. That is, to have all the parties agree.

If the two majors agree in terms that the rest of us can endorse, then we have achieved a great deal and democratic capitalism will have claimed a brighter future for itself.

There is much more work to be done and much pressure to be withstood.

Last month the Spanish Agriculture Minister, Pedro Solbes, was reported to have stepped out of his limousine into a crowd of Andalusian farmers who were brandishing small cucumbers at him and protesting that size does not matter.

Apparently their cucumbers are not large enough to attract EC subsidies.

Spanish Ministers and their EC colleagues may well have to brave much bigger protests before the Uruguay Round is successfully completed and implemented.

But I will be telling them, whether it is cucumbers or farmers' protests, size does not matter.

The size, and expansionary potential, of the world's economic cucumber sandwich is the real issue.

hope you have enjoyed your breakfast.